Technology and Social Change

Lecture 2: Technology and Markets

Bogdan G. Popescu

Tecnológico de Monterrey

Puzzle

The Productivity-Conflict Paradox

Across history, technological breakthroughs have been associated with increases in productivity and wealth.

Yet they simultaneously generated:

  • Mass displacement and immiseration
  • Political upheaval and labor unrest
  • New forms of social vulnerability

Central Puzzle: Why does technological change, which raises aggregate productivity and wealth, so often generate social dislocation, conflict, and vulnerability?

Intro

The Analytical Challenge

How does technology reshape social and economic relations?

To answer this, we require an analytical framework capable of:

  1. Explaining how technological change alters market organization
  2. Identifying when technological innovation produces social harm versus social benefit
  3. Accounting for recurring patterns of political and institutional response
  4. Linking micro-level economic changes to macro-level social outcomes

Intro

Learning Objectives

By the end of this lecture, you will be able to:

  1. Use Polanyi’s theory of embeddedness to analyze the social consequences of technological change
  2. Identify processes of fictitious commodification in both historical and contemporary cases
  3. Trace the causal logic of the double movement linking markets and social protection
  4. Compare how different technological eras generate distinct but structurally similar institutional responses

Conceptual Framework

Conceptual Framework

Karl Polanyi: An Analytical Model

Karl Polanyi (1886–1964) developed a systematic theory of market-society relations.

His framework in The Great Transformation (1944) provides:

  • A typology of economic organization (embedded vs. disembedded)
  • A theory of commodification and its limits
  • A dynamic model of societal response (the double movement)

This constitutes not merely historical description, but a general theory of technological change.

Conceptual Framework

Polanyi’s Core Thesis

Important

Thesis: The attempt to organize society around self-regulating markets constitutes a utopian project that, if pursued, would destroy the human and natural substance of society.

Implication for technology:
Technological change becomes socially destructive when it enables or accelerates the commodification of non-commodities.

FIGURE 1 — The Embeddedness Spectrum

EMBEDDED ECONOMY                              DISEMBEDDED ECONOMY
      │                                              │
      ▼                                              ▼
┌─────────────────────┐                    ┌─────────────────────┐
│  SOCIETY            │                    │  MARKET             │
│  ┌───────────────┐  │                    │  ┌───────────────┐  │
│  │    MARKET     │  │        →→→         │  │   SOCIETY     │  │
│  │  (regulated)  │  │   Transformation   │  │ (subordinated)│  │
│  └───────────────┘  │                    │  └───────────────┘  │
│                     │                    │                     │
│  Markets operate    │                    │  Society reorganized│
│  within social      │                    │  to serve market    │
│  constraints        │                    │  imperatives        │
└─────────────────────┘                    └─────────────────────┘

Constraints:                               Characteristics:
• Social norms                             • Price mechanism dominant
• Moral values                             • Social relations commodified
• Political regulation                     • Institutional subordination

Core Mechanisms

Core Mechanisms

Mechanism 1: Embeddedness and Disembedding

Definition: An economy is embedded when economic transactions are subordinate to social relations, norms, and political decisions.

Disembedding occurs when:

  1. Market logic escapes social constraints
  2. Price mechanisms supplant reciprocity and redistribution
  3. Economic imperatives override social obligations

Critical Insight: Technology does not cause disembedding directly. Rather, it creates conditions of possibility that actors exploit to expand market relations.

FIGURE 2 — Mechanism of Disembedding

                    TECHNOLOGICAL CHANGE
                           │
                           ▼
              ┌────────────────────────┐
              │  New productive        │
              │  possibilities         │
              └───────────┬────────────┘
                          │
          ┌───────────────┼───────────────┐
          ▼               ▼               ▼
    ┌──────────┐   ┌──────────────┐  ┌──────────────┐
    │ Capital  │   │ State actors │  │ Ideological  │
    │ interests│   │ seeking      │  │ entrepreneurs│
    │          │   │ revenue/power│  │              │
    └────┬─────┘   └──────┬───────┘  └──────┬───────┘
         │                │                 │
         └────────────────┼─────────────────┘
                          ▼
              ┌────────────────────────┐
              │  PRESSURE TO           │
              │  COMMODIFY             │
              └───────────┬────────────┘
                          │
                          ▼
              ┌────────────────────────┐
              │  DISEMBEDDED MARKET    │
              │  RELATIONS             │
              └────────────────────────┘

Core Mechanisms

Mechanism 2: Fictitious Commodification

Definition: A fictitious commodity is something that functions as a commodity in market exchange but was not produced for sale.

Polanyi identified three foundational fictitious commodities:

Fictitious Commodity Actual Nature Social Harm from Commodification
Labor Human life and activity Exploitation, alienation, precarity
Land Nature and territory Environmental destruction, displacement
Money Social convention Financial instability, speculation

Warning

Paradox: Markets require labor, land, and money to function as commodities. But treating them as true commodities destroys the social and natural foundations upon which markets depend.

Core Mechanisms

Mechanism 3: The Double Movement

Definition: The double movement describes the dialectical relationship between market expansion and social protection.

First Movement: Extension of market relations into previously non-market domains

Second Movement: Societal counter-mobilization to protect against market harms

This is not anti-progress but a self-protective response inherent to market societies.

FIGURE 3 — The Double Movement Dynamic

                    THE DOUBLE MOVEMENT
                    
TIME ──────────────────────────────────────────────────────────►

        FIRST MOVEMENT              SECOND MOVEMENT
        (Market Expansion)          (Social Protection)
              │                            │
              ▼                            ▼
    ┌─────────────────┐          ┌─────────────────┐
    │ • Commodification│          │ • Labor laws    │
    │ • Deregulation   │    →     │ • Social        │
    │ • Privatization  │          │   insurance     │
    │ • Technological  │          │ • Environmental │
    │   disruption     │          │   regulation    │
    └────────┬────────┘          └────────┬────────┘
             │                            │
             ▼                            ▼
    ┌─────────────────┐          ┌─────────────────┐
    │  SOCIAL HARM    │    →     │  INSTITUTIONAL  │
    │  accumulates    │  triggers│  RESPONSE       │
    └─────────────────┘          └─────────────────┘
             │                            │
             │          ┌─────────┐       │
             └─────────►│ TENSION │◄──────┘
                        │ & CYCLES│
                        └─────────┘

The cycle continues: new technologies enable new forms of 
market expansion, generating new harms and new protections.

Core Mechanisms

Complete Polanyian Mechanism

Important

Causal Chain:

Technological Change → Market Expansion Opportunity → Fictitious Commodification → Social Harm Accumulation → Political Mobilization → Protective Counter-Movement → New Institutional Equilibrium

This sequence provides a predictive framework for analyzing any technological transition.

Historical Case: The Enclosure Movement

Historical Case

Case Overview

Period: 1750s–1850s (Parliamentary Enclosure era in England)

Technology: Agricultural improvements (crop rotation, selective breeding, drainage)

Institutional Change: Privatization of common lands (“enclosure”)

Outcome: Mass displacement, proletarianization, welfare state emergence

Historical Case

Pre-Enclosure: Embedded Land Relations

Before enclosure, land relations were characterized by:

  • Common rights: Peasants could graze animals, gather wood, fish
  • Reciprocal obligations: Lords provided protection; peasants provided labor
  • Non-market allocation: Access based on custom, not purchase

Land was embedded in a moral economy of mutual obligation.

Historical Case

The Enclosure Process

First Movement (Market Expansion):

  1. Agricultural technology increased potential productivity
  2. Landlords sought to capture gains through consolidated holdings
  3. Parliamentary acts authorized privatization of commons
  4. Land became alienable property—a commodity

Fictitious Commodification of Land:

Land is not a commodity because it was not produced for sale, its “supply” cannot respond to price signals, and it embodies community, ecology, and history.

FIGURE 4 — Enclosure as Disembedding

┌─────────────────────────────────────────────────────────────────┐
│                    THE ENCLOSURE MOVEMENT                       │
├─────────────────────────────────────────────────────────────────┤
│                                                                 │
│  BEFORE (Embedded)                 AFTER (Disembedded)          │
│  ┌─────────────────────┐          ┌─────────────────────┐       │
│  │   COMMON LANDS      │          │   PRIVATE PROPERTY  │       │
│  │                     │          │                     │       │
│  │  • Shared access    │    →     │  • Exclusive title  │       │
│  │  • Customary rights │          │  • Market alienable │       │
│  │  • Subsistence base │          │  • Profit-oriented  │       │
│  └─────────────────────┘          └─────────────────────┘       │
│            │                                │                   │
│            ▼                                ▼                   │
│  ┌─────────────────────┐          ┌─────────────────────┐       │
│  │  PEASANT SECURITY   │          │  PROLETARIANIZATION │       │
│  │  • Independent      │    →     │  • Wage-dependent   │       │
│  │    subsistence      │          │  • Mobile labor     │       │
│  │  • Community ties   │          │  • Market vulnerable│       │
│  └─────────────────────┘          └─────────────────────┘       │
│                                                                 │
│  MECHANISM: Land (nature) treated as true commodity             │
│  HARM: Destruction of peasant livelihood and social fabric      │
└─────────────────────────────────────────────────────────────────┘

Historical Case

The Second Movement: Social Protection

Societal response to enclosure harms:

Institution Function Era
Poor Laws Subsistence guarantee 1601, reformed 1834
Factory Acts Labor protection 1833 onwards
Trade Unions Collective bargaining 19th century
Welfare State Comprehensive protection 20th century

These represent the counter-movement against market expansion.

Contemporary Case: Social Media Platforms

Contemporary Case

Digital Commodification

Social media platforms represent a new domain of Polanyian dynamics:

First Movement: Expansion of market relations into:

  • Attention (commodified as advertising inventory)
  • Social relations (commodified as network data)
  • Personal identity (commodified as behavioral profiles)

Key harms identified:

  • Mental health deterioration (especially adolescents)
  • Misinformation propagation
  • Privacy erosion
  • Democratic manipulation

Case Evidence: Australia’s Social Media Ban

Social Media

Source: https://www.youtube.com/watch?v=MkDAXsF4oXA

1. What is the main goal of Australia’s new social media law for children?
2. Why does Reddit describe the new law as “arbitrary”?
3. What happened to Tilly Roseworn, and why is her story central to the debate in the video?
4. What is one reason the ban may not fully work as intended?

FIGURE 5 — Social Media and the Double Movement

┌─────────────────────────────────────────────────────────────────┐
│            SOCIAL MEDIA: A POLANYIAN ANALYSIS                   │
├─────────────────────────────────────────────────────────────────┤
│                                                                 │
│  FIRST MOVEMENT                    SECOND MOVEMENT              │
│  (Platform Expansion)              (Social Protection)          │
│                                                                 │
│  ┌──────────────────────┐         ┌──────────────────────┐      │
│  │ • Attention economy  │         │ • Age restrictions   │      │
│  │ • Data harvesting    │         │ • Privacy laws (GDPR)│      │
│  │ • Algorithmic        │   →     │ • Content moderation │      │
│  │   optimization       │         │   requirements       │      │
│  │ • Behavioral         │         │ • Platform liability │      │
│  │   manipulation       │         │ • Australia ban      │      │
│  └──────────┬───────────┘         └──────────┬───────────┘      │
│             │                                │                  │
│             ▼                                ▼                  │
│  ┌──────────────────────┐         ┌──────────────────────┐      │
│  │ FICTITIOUS COMMODITY │         │ PROTECTIVE           │      │
│  │ • Attention as       │         │ INSTITUTIONS         │      │
│  │   product            │         │ • Regulatory bodies  │      │
│  │ • Children's minds   │   →     │ • Platform oversight │      │
│  │   as market resource │         │ • Digital rights     │      │
│  └──────────────────────┘         └──────────────────────┘      │
│                                                                 │
│  HARM VECTOR: Adolescent mental health, cyberbullying,          │
│               predation, developmental interference             │
└─────────────────────────────────────────────────────────────────┘

Contemporary Case

Comparative Analysis: Enclosure and Social Media

Dimension Enclosure (18th–19th c.) Social Media (21st c.)
Technology Agricultural improvements Digital platforms
Fictitious commodity Land (nature) Attention (human cognition)
Disembedding mechanism Parliamentary acts Platform business models
Social harm Displacement, poverty Mental health, manipulation
Counter-movement Poor Laws, labor unions Age bans, privacy regulation

Competing Interpretations

Competing Interpretations

Alternative Frameworks

Neoclassical Economics:

  • Market expansion represents efficiency gains
  • Harms are “externalities” correctable through property rights
  • No inherent tension between markets and society

Critique: Cannot explain systematic recurrence of protective movements

Competing Interpretations

Marxist and Schumpeterian Perspectives

Karl Marx:

  • Enclosure as “primitive accumulation”
  • Class conflict as driver of institutional change

Convergence with Polanyi: Both identify commodification as source of harm

Divergence: Polanyi sees counter-movement as genuine protection, not merely class compromise

Joseph Schumpeter:

  • Technology destroys old industries, creates new ones (“creative destruction”)
  • Temporary disruption yields long-term progress

Polanyian Critique: Underestimates institutional preconditions of market function; ignores non-market harms

Competing Interpretations

Why Polanyi Remains Essential

Polanyi’s framework uniquely explains:

  1. Why harm is systematic, not incidental
  2. Why protection is endogenous to market societies
  3. Why technology-market interaction requires institutional mediation

His model predicts that AI, biotechnology, and future technologies will generate analogous dynamics.

Modern Relevance

Modern Relevance

Contemporary Applications

Polanyi’s framework illuminates current debates:

Domain First Movement Fictitious Commodity Emerging Counter-Movement
AI/Automation Labor market disruption Human labor UBI proposals, retraining programs
Gig Economy Platform labor markets Worker security Employment classification laws
Cryptocurrencies Monetary decentralization Money/trust Regulatory frameworks
Genetic Data Health data markets Biological identity Genetic privacy laws

Modern Relevance

Policy Implications

Polanyian analysis suggests:

  1. Anticipate harm: Technological change will commodify new domains
  2. Expect resistance: Counter-movements are predictable, not aberrant
  3. Design institutions: Proactive regulation preferable to reactive crisis management
  4. Reject false choices: “Progress vs. protection” is a false dichotomy

Discussion

Discussion

Applying the Framework

Question 1: Embeddedness Analysis
In the social media case shown in the video, was the market operating as a self-regulating market or as an embedded market? What changed after the government intervened?

Tip

Consider: What social constraints existed before intervention? What new constraints does the law impose?

Discussion (Continued)

Question 2: Fictitious Commodification
Which human or social element in the video is being treated like a fictitious commodity? Would Polanyi argue that this creates social harm?

Tip

Consider: What was “not produced for sale” that is now being traded? What happens when supply cannot adjust to price signals?

Discussion (Continued)

Question 3: The Double Movement
Identify the two parts of the “double movement” in the Australian social media case:

  • How did the market expand?
  • How did society respond?

Tip

Consider: What institutional form did the counter-movement take? Is this analogous to historical cases?

Discussion Summary

Question Analytical Focus Polanyian Concept
Q1 Market constraints Embeddedness
Q2 Non-commodities in markets Fictitious commodification
Q3 Expansion and response Double movement

Key Takeaways

Key Takeaways

Applying Polanyi to Technological Change

For analyzing any technological transition:

  1. Identify the disembedding mechanism (how does technology enable market expansion?)
  2. Locate the fictitious commodity (what non-commodity is being commodified?)
  3. Trace the harm vector (who bears costs? through what channels?)
  4. Anticipate the counter-movement (what institutional responses are emerging?)

Key Takeaways

Applying Polanyi to Technological Change

Era Technology Fictitious Commodity Counter-Movement
Agricultural Enclosure Land Poor Laws
Industrial Factory Labor Labor rights
Digital Platform Attention Privacy/safety regulation
Emerging AI Cognition/Identity ?

Conclusion

Core Insight:

Technology does not autonomously produce social outcomes.

The relationship between technology and society is institutionally mediated.

Polanyi provides the analytical tools to understand this mediation.

Bibliography

Polanyi, K. (1944). The great transformation: The political and economic origins of our time. Farrar & Rinehart.

Polanyi, K. (1957). The economy as instituted process. In K. Polanyi, C. Arensberg, & H. Pearson (Eds.), Trade and Market in the Early Empires (pp. 243–270). Free Press.

Dale, G. (2010). Karl Polanyi: The limits of the market. Polity Press.

Granovetter, M. (1985). Economic action and social structure: The problem of embeddedness. American Journal of Sociology, 91(3), 481–510.

Haidt, J. (2024). The anxious generation: How the great rewiring of childhood is causing an epidemic of mental illness. Penguin Press.